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Oxford Economic Papers Advance Access originally published online on March 24, 2005
Oxford Economic Papers 2005 57(4):674-692; doi:10.1093/oep/gpi026
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Right arrow F10 - General
Right arrow F13 - Trade Policy; International Trade Organizations
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Right arrow J31 - Wage Level and Structure; Wage Differentials
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© Oxford University Press 2005; All rights reserved

Trade, services, and wage inequality

Philippe Askenazy

Paris Sciences Economiques (CNRS-ENS-EHESS-ENPC) and CEPREMAP, 48 bd Jourdan 75014 Paris, France; e-mail: philippe.askenazy{at}ens.fr

We develop a simple endogenous growth model with two countries, North that innovates, and South. As in Dinopoulos and Segerstrom (1999), trade liberalization raises wage inequality through stimulating R&D activity. However, the consequences of North-South trade become ambiguous when a service sector protected against international competition is included in the model. The key result is that, if the weight of service in final consumption is large enough, then trade could result in a reduction of wage inequality.

Key Words: JEL classification: F1 • J3


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